We Think Shareholders Are Less Likely To Approve A Large Pay Rise For Johnson Electric Holdings Limited's (HKG:179) CEO For Now

Key Insights

• Johnson Electric Holdings' Annual General Meeting to take place on 12th of July
• Salary of US$922.0k is part of CEO Patrick Wang's total remuneration
• The total compensation is 916% higher than the average for the industry
• Johnson Electric Holdings' EPS grew by 1.4% over the past three years while total shareholder loss over the past three years was 35%

Shareholders of Johnson Electric Holdings Limited (HKG:179) will have been dismayed by the negative share price return over the last three years. What is concerning is that despite positive EPS growth, the share price has not tracked the trend in fundamentals. These are some of the concerns that shareholders may want to bring up at the next AGM held on 12th of July. They could also try to influence management and firm direction through voting on resolutions such as executive remuneration and other company matters. We discuss below why we think shareholders should be cautious of approving a raise for the CEO at the moment.

See our latest analysis for Johnson Electric Holdings

Comparing Johnson Electric Holdings Limited's CEO Compensation With The Industry

Our data indicates that Johnson Electric Holdings Limited has a market capitalization of HK$11b, and total annual CEO compensation was reported as US$2.8m for the year to March 2024. We note that's an increase of 87% above last year. While this analysis focuses on total compensation, it's worth acknowledging that the salary portion is lower, valued at US$922k.

For comparison, other companies in the Hong Kong Auto Components industry with market capitalizations ranging between HK$7.8b and HK$25b had a median total CEO compensation of US$275k. Hence, we can conclude that Patrick Wang is remunerated higher than the industry median. Moreover, Patrick Wang also holds HK$30m worth of Johnson Electric Holdings stock directly under their own name, which reveals to us that they have a significant personal stake in the company.

Component	2024	2023	Proportion (2024)
Salary	US$922k	US$922k	33%
Other	US$1.9m	US$577k	67%
Total Compensation	US$2.8m	US$1.5m	100%

Talking in terms of the industry, salary represented approximately 83% of total compensation out of all the companies we analyzed, while other remuneration made up 17% of the pie. Johnson Electric Holdings pays a modest slice of remuneration through salary, as compared to the broader industry. If total compensation is slanted towards non-salary benefits, it indicates that CEO pay is linked to company performance.

A Look at Johnson Electric Holdings Limited's Growth Numbers

Johnson Electric Holdings Limited's earnings per share (EPS) grew 1.4% per year over the last three years. Its revenue is up 4.6% over the last year.

We're not particularly impressed by the revenue growth, but we're happy with the modest EPS growth. So there are some positives here, but not enough to earn high praise. Looking ahead, you might want to check this free visual report on analyst forecasts for the company's future earnings..

Has Johnson Electric Holdings Limited Been A Good Investment?

Few Johnson Electric Holdings Limited shareholders would feel satisfied with the return of -35% over three years. This suggests it would be unwise for the company to pay the CEO too generously.

In Summary...

The fact that shareholders are sitting on a loss on the value of their shares in the past few years is certainly disconcerting. The stock's movement is disjointed with the company's earnings growth, which ideally should move in the same direction. Shareholders would be keen to know what's holding the stock back when earnings have grown. At the upcoming AGM, shareholders will get the opportunity to discuss any issues with the board, including those related to CEO remuneration and assess if the board's plan will likely improve performance in the future.

It is always advisable to analyse CEO pay, along with performing a thorough analysis of the company's key performance areas. We identified 2 warning signs for Johnson Electric Holdings (1 doesn't sit too well with us!) that you should be aware of before investing here.

Arguably, business quality is much more important than CEO compensation levels. So check out this free list of interesting companies that have HIGH return on equity and low debt.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com